State-Owned Controlling Listed Companies M&A Shows New Features: "Core Business Focus" Becomes Important Driving Force

Securities Daily Reporter Du Yumeng

Since the beginning of this year, mergers and acquisitions (M&A) and restructuring of state-controlled listed companies in the A-share market have continued to accelerate.

For example, China Chengxin Import and Export Corporation completed the acquisition of 100% equity of Zhongji Jiangsu Clean Energy Co., Ltd.; Xiamen Port Development Co., Ltd. completed the purchase of 70% equity of Xiamen Container Terminal Group Co., Ltd. held by Xiamen International Port Co., Ltd.; China Shenhua Energy Company Limited (hereinafter referred to as “China Shenhua”) completed the purchase of shares in 12 core enterprises under its controlling shareholder, China Energy Investment Corporation.

According to Tonghuashun data, based on the first announcement date and excluding failed transactions, as of March 23 this year, there have been a total of 224 M&A events involving state-controlled listed companies (actual controllers are the State-owned Assets Supervision and Administration Commission of the State Council and local SOAs) in the A-share market, covering fields such as aviation, energy, and electronics. Among them, 43 are controlled by central enterprises. From the disclosed M&A targets of several central enterprise-controlled listed companies, “focusing on main business” has become an important driving force.

For example, to enhance core competitiveness in their main business and further promote domestic capacity optimization, in February this year, Guotou Zhonglu Fruit Juice Co., Ltd. proposed to acquire 70% equity of Luochuan Lingshan Apple Deep Processing Technology Development Co., Ltd. through a package of equity purchase and capital increase transactions. Similarly, China Eastern Airlines Corporation Limited (hereinafter “China Eastern”) transferred its 49% stake in its joint venture, China Eastern Supply Chain, to China Eastern Logistics Co., Ltd., to better utilize and leverage its advantages in aircraft material supply chain transportation and management, thereby providing more efficient and high-quality aircraft material supply chain management and logistics services for China Eastern.

Practically, current trends show that central enterprise mergers and restructuring are shifting from past scale expansion to focus on core businesses or strategic concentration, aligning closely with the policy orientation of “three集中” of state capital.

To better play the backbone and pillar role of central enterprises in the national economy, Zhang Yuzhuo, Secretary of the Party Committee and Director of the State-owned Assets Supervision and Administration Commission (SASAC), clarified during this year’s National Two Sessions that during the 14th Five-Year Plan period, efforts should be made to achieve new breakthroughs in promoting the “three集中” of state capital. The goal is, after several years of effort, to change the situation where the layout of the state-owned economy is long and widely distributed but lacks high-end and has many low-end sectors, by concentrating central enterprise assets into 20 key industries out of the 97 major industries in the national economy, and to ensure that over 88% of the operating income of central enterprises is also concentrated in these 20 industries.

Li Xiao, Deputy Director of the Capital Market Supervision and Reform Research Center at the Central University of Finance and Economics, told Securities Daily that the current guidance for central enterprise M&A and restructuring has shifted from scale expansion to strategic focus. Specifically, this involves moving from broad coverage to focusing on key future areas, strengthening control of the national economy in these sectors; transitioning from traditional industry integration to new and old kinetic energy conversion, with restructuring goals shifting from cost reduction and efficiency improvement to technological breakthroughs and ecological construction; and moving from administrative dominance to market-driven approaches, encouraging central enterprises to use market-based methods (such as equity cooperation and joint R&D) to integrate external innovation resources and improve resource allocation efficiency.

Li Xiao predicts that, in terms of industry distribution, central enterprise restructuring will likely focus on areas such as energy security (e.g., clean coal utilization, new power systems), high-end manufacturing (e.g., aerospace, semiconductor equipment), and digital economy (e.g., industrial internet, computing infrastructure). Cross-group and cross-regional industrial chain integrations are also expected. Additionally, strategic emerging industries and future industries will become hotspots for restructuring, such as central enterprises acquiring or merging companies with key core technologies (e.g., chip materials, hydrogen energy storage and transportation), or establishing industrial funds to incubate cutting-edge technologies (e.g., brain-computer interfaces, controlled nuclear fusion).

Notably, on March 16, after China Shenhua completed registration of the consideration shares involved in its restructuring with the Shanghai branch of China Securities Depository and Clearing Corporation Limited, this multi-billion yuan asset restructuring not only set a new record for the scale of share issuance for asset purchases in the A-share market but also benefited from the “simple review process” policy, providing a “sample” experience for subsequent restructuring and integration of central enterprise-controlled listed companies in the A-share market.

According to Zhu Changming, Partner at Sunshine Law Firm and Head of the State-Owned Enterprise Mixed Ownership Reform Center, this restructuring clearly conveys the regulatory guidance of “compliance equals efficiency.” That is, high-quality listed companies with good long-term information disclosure, sound governance, and prominent main businesses will gain more efficient capital operation channels. This is expected to create a market ecosystem of “compliance—efficiency—more compliance” for subsequent central enterprise restructuring and integration in the A-share market, guiding central enterprise-controlled listed companies to further focus on their main businesses and improve governance, while also encouraging more central enterprise-controlled listed companies to actively utilize capital market tools, boosting M&A activity, and forming a virtuous cycle of “high-quality companies smoothly accessing.” This will further promote the optimization and restructuring of the layout of state-owned capital.

Zhu Changming predicts that during the 14th Five-Year Plan period, central enterprise M&A and restructuring are likely to usher in a new cycle of strategic leadership and value creation, with the synergy effects and growth expectations from restructuring driving a revaluation of central enterprise value.